The Hospitality Crisis: Are Your Customers Going Bankrupt?

The hospitality industry in Australia is currently facing significant financial distress, with insolvencies reaching their highest levels since 2015. 

Recent data from Equifax indicates a 41% increase in insolvencies from the same time last year and a staggering 145.7% increase since 2022.

These alarming statistics raise serious concerns about the survivability of many hospitality businesses, particularly SMEs and sole traders.

One in thirteen hospitality businesses is at risk of failure, with the industry ranking third for arrears in terms of invoice payments more than 60 days late.

High-profile closures, such as Good Group Australia, which operated a string of high-end steak restaurants and other venues across three states, and the Asian fusion restaurant Gingerboy, underscore the severity of the crisis. Good Group Australia’s collapse resulted in $23 million in debt and the loss of 200 jobs.

Credit reporting bureau CreditorWatch ranks hospitality first among industries for the rate of external administrations and Australian Taxation Office tax debts greater than $100,000. 

Patrick Coghlan, CEO of CreditorWatch, warns that conditions will worsen for businesses in the hospitality sector before they improve. He highlights that hospitality is a high-risk industry even in boom times, with challenges in passing on price rises to consumers who can easily opt for cheaper dining options or eat at home.

The Impact on Food and Beverage Suppliers

The financial instability of hospitality businesses has a direct impact on food and beverage suppliers.

When venues struggle to manage their cash flow and fail to meet payment deadlines, suppliers are left with unpaid invoices and mounting financial pressure.

As hospitality businesses accrue more debt and default on payments, suppliers face the risk of significant financial losses and disrupted cash flow.

CreditorWatch’s research reveals that almost a quarter of businesses become insolvent within 12 months of their first default, with the probability increasing to 42% after a second default.

This precarious situation highlights the urgent need for suppliers to secure their payments and manage their receivables more effectively.


How PencilPay Can Help

In these challenging times, PencilPay offers a comprehensive solution to help food and beverage suppliers manage their receivables and mitigate the risks associated with the financial instability of their hospitality customers.

Here’s how PencilPay can make a difference:

  1. Onboard Customers with Online Credit Applications: PencilPay’s digital credit applications verify customer information using company data and store a payment method on file, providing security over the stock. This ensures that suppliers know who they are giving terms to and have a fallback payment method if necessary.
  2. Seamless Integration with Accounting Software: PencilPay integrates smoothly with existing accounting software, such as MYOB Advanced, eliminating the need for manual data entry and streamlining the accounts receivable process. This integration ensures that all financial data is up-to-date and easily accessible.
  3. Automate Payment Processing: With PencilPay, suppliers can set custom payment plans for customers who are struggling with making payments. Automatic billing ensures that invoices are paid on time, reducing the need for manual follow-ups and collections.
  4. Improve Cash Flow Management: By automating the invoicing and payment process, PencilPay helps suppliers reduce their debtor days and improve their overall cash flow. This financial stability allows suppliers to continue operating smoothly and invest in their growth.


The hospitality industry in Australia is facing unprecedented challenges, with increasing insolvencies and financial instability affecting both businesses and their suppliers.

In this tough economic climate, food and beverage suppliers must adopt effective strategies to manage their receivables and secure their payments.

PencilPay provides the tools and solutions necessary to navigate these challenging times, ensuring that suppliers can maintain their cash flow and protect their financial health.

By leveraging PencilPay’s features, suppliers can reduce debtor days, streamline their operations, and achieve greater financial stability.